The Biggest Job Creator You Never Heard Of: The Patent Office

As the U.S. President and Congress desperately search for ways to regain the 8.4 million jobs lost during the current recession, the greatest opportunity of all to spur job growth in our stalled economy may ironically lie right under their noses: in the Patent Office.

For all its obscurity within the bowels of the federal bureaucracy, the U.S. Patent and Trademark Office (USPTO) may be the single greatest facilitator of private sector job creation and economic growth in America. It is this agency, after all, that issues the patents that small businesses — especially technology startups — need to attract venture capital investment, develop new products and services, and serve their historic role as the primary source of almost all new net job growth in America. According to one recent study, 76 percent of startup executives say that patents are essential to their funding efforts.

Unfortunately, the diversion of hundreds of millions of dollars in USPTO fees over the years and inadequate funding levels have left the patent office with an unprecedented backlog of 1.2 million patent applications waiting to be examined. The result, says David Kappos, the new USPTO director, has been catastrophic.

“Hundreds of thousands of groundbreaking innovations are sitting on the shelf literally waiting to be examined,” he told an audience at a biotechnology industry conference this week. “[This results in] jobs not being created, life-saving drugs not going to the marketplace, companies not being funded, businesses not being formed.”

How many jobs are not being created because of the patent backlog?

“Millions,” said Kappos. Millions of jobs!

A recent study put the costs of the “forgone innovation” resulting from patent delays in the many billions of dollars annually.

To learn how such patent office dysfunction affects some of America’s most promising young companies in the real world, we spoke to Vern Norviel during the research for our forthcoming book. The former general counsel at biotech stars Affymetrix and Perlegen Sciences, Norviel today leads the patents and innovation counseling practice at the Silicon Valley law firm Wilson Sonsini Goodrich and Rosati and has an insider’s eye view of the real-world effects of patent delays on some of the most exciting innovation efforts in the life sciences today.

“Over the last few years, all my life sciences companies have either been slowed down or stopped by problems with the patent office,” says Norviel. “And I mean all of them. That’s because in this field it’s absolutely necessary to have a bulletproof patent. It can cost a billion dollars to bring a new drug to market, and no one is going to invest that kind of money unless they know they’ve got exclusive rights to it and can get a return on their investment.”

Norviel describes one company in particular that he’s working with, Innate Immune: “They have a new treatment for lupus that is clearly patentable,” says Norviel. But the company has had to wait seven years so far, and no patent in sight. “They had venture investors ready to give them $30 million to move the drug to clinical trials. But without a patent, they backed out. So now the company survives on little bits of friend and family money.”

Innate Immune’s CEO, Dr. Andrew Perlman, adds that the company also had a corporate partnership in the works with a large drug manufacturer, but as he puts it, “their attorneys were alarmed that we did not have the patent, so the deal fell through.”

No patent meant no business, no help for suffering patients, and no jobs created.

And Innate Immune is hardly alone. Our research has documented dozens of other companies, in life sciences as well as other burgeoning high-tech fields, whose business and job creation efforts have been stalled or bankrupted by patent office dysfunction.

In contrast, we know that patents create jobs — sometimes many thousands of them. Just consider the job-creating effects of Steve Wozniak’s 1979 patent for a microcomputer, for example, or Larry Page’s 1998 patent for Google’s search engine. Then there’s Jack Kilby’s 1959 patent on the semiconductor integrated circuit, which gave birth to a semiconductor industry that directly employs 185,000 people just in the U.S. today, as well as contributing to jobs throughout the larger $1.1 trillion global electronics industry.

After devoting $30 billion to hiring credits and other job creation schemes, Congress should consider spending a fraction of that amount to increase the efficiency of the patent office — a move which could well generate the biggest bang of all for our job-creating buck.

Henry R. Nothhaft is CEO of technology miniaturization firm Tessera, Inc. He and co-author David Kline’s tentatively-titled Great Again! An Entrepreneurial Plan for Revitalizing America’s Innovation Leadership will be published next year by Harvard Business Press.